Equity bulls remain cognitively biased to the belief that a rising interest rate market implies growth expectations (enough to warrant a Fed Taper) that confirm the hope priced into stocks (entirely missing the bubble concerns and technical corruptions in the markets caused by these policies). However, at the very short-end of the interest-rate curve in the US, the market has pulled forward rate-hike expectations from End-2015 to May 2015 in the last month alone. The problem with the velocity of this adjustment is that in order to hike rates - the entire extraordinary asset purchase program known as QE4EVA has to be over... Still think equities are pricing that in?
Here's the consensus...
The yield on 10-yr #treasury [4] notes should push higher in response to improving growth prospects and less QE. Next key level is 2.4%.
— Joseph A. LaVorgna (@Lavorgnanomics) June 11, 2013 [5]
The Fed Funds futures market has shifted notably...
[6]
And so have Bonds and the USD (shouldn't USD be higher in 'growth' is coming our way?) - but stocks remain a little umm - ignorant?
[7]
Charts: Barclays and Bloomberg